IDEAS home Printed from https://ideas.repec.org/p/hoo/wpaper/18103.html

Alternatives For Reserve Balances And The Fed's Balance Sheet In The Future

Author

Listed:
  • John B. Taylor

Abstract

This paper traces the evolution of the Fed's balance sheet in the years since the global financial crisis and presents economic reasons why the eventual size of the balance sheet and level of reserve balances should be such that the interest rate is determined by the demand and supply of reserves—in other words, by market forces—rather than by an administered rate under interest on excess reserves (IOER). The Fed would thus be operating as it did in the years before the crisis. The paper also contrasts this size with a system where the supply of reserves remains above the demand, and the interest rate must be administered through IOER.

Suggested Citation

  • John B. Taylor, 2018. "Alternatives For Reserve Balances And The Fed's Balance Sheet In The Future," Economics Working Papers 18103, Hoover Institution, Stanford University.
    • Handle: RePEc:hoo:wpaper:18103
    as

    Download full text from publisher

    File URL: https://www.hoover.org/sites/default/files/research/docs/18103-taylor.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. John B Taylor, 2009. "The Need to Return to a Monetary Framework," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 44(2), pages 63-72.
    2. Cochrane, John H., 2014. "Monetary policy with interest on reserves," Journal of Economic Dynamics and Control, Elsevier, vol. 49(C), pages 74-108.
    3. John B. Taylor, 2009. "The Need for a Clear and Credible Exit Strategy," Book Chapters, in: John D. Ciorciari & John Taylor (ed.), The Road Ahead for the Fed, chapter 6, Hoover Institution, Stanford University.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bofinger, Peter & Feld, Lars P. & Schmidt, Christoph M. & Schnabel, Isabel & Wieland, Volker, 2018. "Vor wichtigen wirtschaftspolitischen Weichenstellungen. Jahresgutachten 2018/19 [Setting the Right Course for Economic Policy. Annual Report 2018/19]," Annual Economic Reports / Jahresgutachten, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung, volume 127, number 201819.
    2. Lars P Feld & Volker Wieland, 2021. "The German Federal Constitutional Court Ruling and the European Central Bank’s Strategy," Journal of Financial Regulation, Oxford University Press, vol. 7(2), pages 217-253.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. John Taylor, 2010. "An Exit Rule for Monetary Policy," Discussion Papers 09-009, Stanford Institute for Economic Policy Research.
    2. John B. Taylor, 2010. "Commentary: monetary policy after the fall," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 337-348.
    3. James Bullard, 2016. "Permazero," Cato Journal, Cato Journal, Cato Institute, vol. 36(2), pages 415-429, Spring/Su.
      • James B. Bullard, 2016. "Permazero," Review, Federal Reserve Bank of St. Louis, vol. 98(2).
      • James B. Bullard, 2015. "Permazero," Speech 256, Federal Reserve Bank of St. Louis.
    4. Pierre L. Siklos, 2010. "Inflation Targeting: It'S Not Broke, It Doesn'T Need Fixing, But Can It Survive?," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 1(01), pages 59-80.
    5. Sohei Kaihatsu & Koichiro Kamada & Mitsuru Katagiri, 2016. "Theoretical Foundations for Quantitative Easing," IMES Discussion Paper Series 16-E-04, Institute for Monetary and Economic Studies, Bank of Japan.
    6. Reichlin, Lucrezia & Ricco, Giovanni & Tarbé, Matthieu, 2023. "Monetary–fiscal crosswinds in the European Monetary Union," European Economic Review, Elsevier, vol. 151(C).
    7. Miller, Steph & Hoarty, Blake, 2020. "On Regulation and Excess Reserves: The Case of Basel III," Working Papers 10243, George Mason University, Mercatus Center.
    8. Reis, Ricardo, 2016. "Funding quantitative easing to target inflation," LSE Research Online Documents on Economics 67883, London School of Economics and Political Science, LSE Library.
    9. Mickey D. Levy, 2017. "The necessity for a strategic approach to monetary policy," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 52(2), pages 114-117, April.
    10. Dutkowsky, Donald H. & VanHoose, David D., 2017. "Interest on reserves, regime shifts, and bank behavior," Journal of Economics and Business, Elsevier, vol. 91(C), pages 1-15.
    11. Cochrane, John H., 2017. "The new-Keynesian liquidity trap," Journal of Monetary Economics, Elsevier, vol. 92(C), pages 47-63.
    12. Ricardo Reis, 2016. "QE in the future: the central bank's balance sheet in a financial crisis," Discussion Papers 1620, Centre for Macroeconomics (CFM).
    13. John B. Taylor, 2010. "Does the Crisis Experience Call for a New Paradigm in Monetary Policy?," CASE Network Studies and Analyses 402, CASE-Center for Social and Economic Research.
    14. Edward C. Prescott & Ryan Wessel, 2016. "Fiat Value in the Theory of Value," Staff Report 530, Federal Reserve Bank of Minneapolis.
    15. Ricardo Reis, 2017. "QE in the Future: The Central Bank’s Balance Sheet in a Fiscal Crisis," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 65(1), pages 71-112, April.
    16. Kliem, Martin & Kriwoluzky, Alexander & Sarferaz, Samad, 2016. "Monetary–fiscal policy interaction and fiscal inflation: A tale of three countries," European Economic Review, Elsevier, vol. 88(C), pages 158-184.
    17. Massimiliano Marzo & Paolo Zagaglia, 2018. "Macroeconomic Stability in a Model with Bond Transaction Services," IJFS, MDPI, vol. 6(1), pages 1-27, February.
    18. Creel, Jérôme & Hubert, Paul, 2015. "Has Inflation Targeting Changed The Conduct Of Monetary Policy?," Macroeconomic Dynamics, Cambridge University Press, vol. 19(1), pages 1-21, January.
    19. Ngotran, Duong, 2016. "The E-Monetary Theory," MPRA Paper 77206, University Library of Munich, Germany, revised 25 Feb 2017.
    20. David Andolfatto & Andrew Spewak, 2019. "Understanding Lowflation," Review, Federal Reserve Bank of St. Louis, vol. 101(1), pages 1-26.

    More about this item

    Keywords

    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hoo:wpaper:18103. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Webmaster (email available below). General contact details of provider: https://edirc.repec.org/data/hostaus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.